Cryptocurrency has seen a massive spike in popularity recently, but you might still have a feeling that you need to be a member of an elite club to really know what you’re doing. Making mistakes can literally cost you thousands, and it seems like nobody knows what the rules are. Here are a few tips and tricks you can use to start managing your own cryptocurrency like part of the 1%.
1. Enter Trades With a Plan
When you’re an inexperienced trader, entering trades can be risky. Your inexperience makes you an immediate target for the “whales”, the larger traders that will watch you like a hawk until you make a mistake, like stopping what you’re doing to research form 8832, that will make them wealthier. So it’s important to enter trades prepared to achieve whatever your goal is, whether you’re planning to be a scalper or a day trader. Remember, for every win there is in cryptocurrency, someone else is losing, and you should plan to avoid being the losing party.
2. Learn About Stop Losses
The term “stop loss” should become familiar to you if you’re planning to trade responsibly. Essentially, a stop loss is a set limit that you establish for capping out your profits. This will make it a lot easier to cut your losses if a trade goes sour, rather than continuing to hemorrhage cash because you’re either not paying attention or got a little too greedy. Choosing your stop loss should be about making sure you don’t lose what you invested in the first place. Whatever you spend to acquire your coin should be the limit of your loss.
Sure, it’s a bummer not to make a profit off of a trade, but it would be much worse to lose actual money by forgetting to be prudent. Prudence should also guide you when you choose what trades to chase. A smarter trader isn’t going to chase massive profits, but will be content to sit still and bet on more certain, if less lucrative bets.
3. Don’t Just Buy When Prices Are Low
It might seem obvious that when a coin’s price drops, that’s when you should be buying. But this isn’t always the case. When considering what coin to buy, you should think about its market cap, rather than the price. This is how conventional stocks are evaluated, as well, so it should be something that’s easy to learn more about. Just remember that the higher a coin’s market cap is, the more seriously you should consider investing in it.
4. Always Diversify
No matter how much you learn or how experienced you become, investing will always be somewhat unpredictable. That’s why it’s essential to continually be diversifying your investment portfolio. But this doesn’t mean investing in diverse coins, as the various forms of cryptocurrency will always rise and fall in their value along with Bitcoin, and shouldn’t be relied on for a safety net. Rather, it’s important to be investing in other types of assets, such as real estate and mutual funds. While not as exciting as crypto, these stocks will be much safer and provide a more stable backup plan should your cryptocurrency investments go awry.
5. Think Independently
A big part of investing in any asset is becoming a part of a community of people who have very strong opinions about what should or should not be invested in. It can be really easy to start going along with whatever the crowd is doing, and feel like you’re missing out on a great opportunity if you resist the urge. But it’s important to avoid situations where everyone is jumping on a trend and it seems like everyone is making a lot of money in a short amount of time. This is usually where things go south quickly, losses start streaming in, and hardly anyone comes out intact.
Lastly, it’s extremely important to keep your cool while trading. Becoming too emotionally invested can land you in hot water very quickly, so just use these tips to learn the basics and keep your head on straight.
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